Russia's government kicked off its biggest privatisation drive since the collapse of the Soviet Union, raising 95.7 billion roubles ($3.26 billion) with the sale of 10% in its second biggest bank VTB.
The bank sold the shares at $6.25 per GDR -- broadly in line with current share prices -- and VTB's chief executive Andrei Kostin said the placing was twice oversubscribed, pushing VTB shares 2.6% up in early trade on Monday.
Three smaller Russian companies pulled IPOs worth a combined total of more than $2 billion this month, blaming a turbulent market environment and raising some questions over VTB's success.
But demand for VTB was bolstered by a 10% fall in its share price since the end of January -- after the government's decision to sell the stake via the open market rather than by closed sale to a consortium led by private equity group TPG -- and by international investors seeking access to Russian growth via a well-known name.
While emerging market funds have seen strong outflows this year, Russia has bucked the trend. Russia-focused funds attracted inflows of $267 million last week, according to EPFR data, against outflows in China, Brazil and India.
"It is a high quality stock, fairly liquid. Investors are interested in such names despite the fairly negative market conditions. Plus the valuation was fair," said Marina Shestakova, deputy chief investment officer at Wermuth Asset Management, which has around $320 million in assets under management in Russia and the former Soviet Union.
Italian insurer Generali and TPG Capital are expected to buy VTB shares in total worth $400 million and the government said funds from the United States, Europe, Middle East and Asia showed interest.
Analysts said the success of the sale -- the first step in Russia's massive three-year 1 trillion rouble privatisation drive -- boded well for coming IPOs. Sberbank, Russia's biggest lender, will follow VTB later this year or in 2012.
"It is a signal to look at the shares of other privatisation targets," Egor Fyodorov, an analyst with Bank of Moscow.
Prime Minister Vladimir Putin called the VTB placing a success.
"This is ... proof of the trust in the Russian financial system," Putin was quoted as telling VTB's chief executive Andrei Kostin on Monday.